Germany and France, two of the largest economies in the euro area, differed in their gross domestic product (GDP) trends in the first quarter of 2021. On a sequential basis, the German economy shrank by 1, 7%, while France saw a slight rebound of 0.4%. Disaggregated data is expected to be released this week. Unlike the United States, the post-pandemic recovery has been weak so far in the euro area. The slow pace of vaccination and a further rise in covid-19 cases this year have weighed on the outlook for Germany and France. The impact was visible in their growth figures for the March quarter, with GDP levels still 4-5% below pre-pandemic levels.
Covid-19 cases rose again in April in both countries, leading to further lockdown-like curves. It also dampened hopes of a recovery in April-June. Generous federal packages and loose monetary policy alone would not be enough. Rapid vaccinations will be essential to economic recovery, as the example of the United States shows.
2. Merchandise trade in the United States
The United States will release preliminary merchandise trade data for April on Friday. With the threat of covid-19 rapidly receding in the country, pent-up demand is boosting imports. The merchandise trade deficit hit a record $ 91.6 billion in March. April figures are due on Friday.
The trend in the goods sector is expected to continue. The largest increase in imports in March was seen in consumer goods, such as textiles, toys and mobile phones, followed by industrial supplies and capital goods.
Shipments from India accounted for 2.2% of total US imports in March, more than the average share of 1.8% last year. Major exports from India to the United States included pharmaceuticals, jewelry and gemstones, automobiles, and textiles. The recovery in demand in the United States is important for the rest of the world, especially for India, where domestic demand has been ravaged by the lockdowns induced by the second wave.
3. Media financial data
Three media firms will release their March quarter results this week: UFO Moviez in the entertainment segment on Wednesday, and TV Today and Jagran Prakashan in the news segment on Friday. Balaji Telefilms and Dish TV are also expected to release results this week. The media and entertainment industry lost a quarter of its revenue last year, as revenue fell to 2017 levels, according to an EY-FICCI report. Print and TV advertising saw sharp declines and digital ads also suffered from lack of appetite. Most of the segments were on a recovery path until the second wave hit. The biggest loser has been the movie segment, as UFO Moviez’s dismal numbers show. Platform-independent companies are better suited to absorb the shock induced by the pandemic. Business innovation will be key to staying afloat, and investors will want to know the details of these plans from management.
4. Pharmaceutical benefits
Four listed pharmaceutical companies – Pfizer India, Sun Pharmaceuticals, Ipca Labs and Wockhardt – are expected to release their fourth quarter results this week. The pharmaceutical industry, in general, has benefited from the pandemic, although the gains have varied from company to company. Ipca Labs, for example, was one of the biggest beneficiaries in the June 2020 quarter, despite the lockdown, thanks to the sale of hydroxychloroquine sulfate. Profits for the other three companies started to recover from the September quarter.
Analysts expect the March quarter results to be moderate as the business season has been weak in India. Additionally, the covid curve had fallen during this time, eroding the pandemic bump. Now, with the second wave ravaging India, the industry is once again sniffing higher income. Against a 5% loss for the Sensex, the S&P BSE Healthcare Index has gained 11% in the past three months, with Hikal Ltd leading the pack with triple-digit gains.
5. Cement revenue
Ramco Cements and India Cements will release their March quarter results on Monday. The cement sector has gradually recovered since the lockdown last year, thanks in large part to resilient rural demand and a pickup in construction activity. Both companies improved their sales figures in October-December. Gains could continue into January-March, a quarter that typically sees high demand each year, as builders aim to close projects by the end of the year.
The downside, however, is the increase in raw material costs, but most companies in the industry now pass these costs on to consumers through price increases. The challenges posed by the second wave make the outlook for the coming months uncertain and investors will closely follow the company projections. Rural demand cannot bail out the sector this time around – several government projects are underway, but demand for housing has declined. Fitch Ratings predicts a 20% sequential drop in demand for cement in the current quarter.